Yahoo Drops Dailymotion Deal Over French Govt Opposition

Yahoo! Inc. (NASDAQ:YHOO)’s plans to acquire a majority stake in Dailymotion are reportedly dead in the water due to the French government.

Yahoo! Inc. Denies Investing in Dailymoiton

Technology giant Yahoo! Inc. (NASDAQ:YHOO) has scrapped plans to invest in French online video site Dailymotion, after the French government opposed the Internet giant acquiring a majority stake in the company, according to reports.

According to The Wall Street Journal reports, the France Industry Minister Arnaud Montebourg told Yahoo chief operating officer Henrique de Castro and France Telecom SA (ADR) (NYSE:FTE) (EPA:FTE) (BIT:FTE) chief financial officer Gervais Pellissier during a meeting in April that he did not want a 75 percent stake in one of France’s best startups to be sold to a U.S. Internet giant.

France’s industry minister said on Wednesday that Yahoo! Inc. (NASDAQ:YHOO)’s plan to buy a majority stake in online video website Dailymotion from France Telecom SA (ADR) (NYSE:FTE) (EPA:FTE) (BIT:FTE) would not have benefited the two companies. Instead, the French government sought to persuade Yahoo in acquiring a 50 percent stake. However, this isn’t a scheme the tech giant is willing to entertain.

Dailymotion, founded in 2005 by two young entrepreneurs has received roughly $68 million in venture capital backing. France owns 27 percent stake in France Telecom SA (ADR) (NYSE:FTE) (EPA:FTE) (BIT:FTE) which bought 49 percent of Dailymotion in 2011, to meet increasing demand from customers for video content on mobile devices. The agreement provided for a progressive capital increase to 100 percent in 2013, which was completed earlier this year.

Yahoo! Inc. (NASDAQ:YHOO) had been in talks to buy a 75 percent stake in Dailymotion, owned by France Telecom, in a deal that would have valued Europe’s largest video website at $300 million.

Dailymotion is the 12th biggest video-sharing website in the world, according to web tracking firm comScore, trailing Google Inc (NASDAQ:GOOG)’s YouTube, but with a leading position in Europe. Dailymotion had 166 million unique users in January. This would have been a major steppingstone for Yahoo’s new CEO Marissa Mayer, who has been snapping up mobile start-ups since taking over the firm.

Dailymotion gets roughly 120 million unique users per month, more than any other French web company. Last year it broke even and generated 40 million euros in sales. France Telecom has been searching for a partner to boost the site’s development outside Europe, especially the United States.

Yahoo! Inc. (NASDAQ:YHOO)’s Mayer, who has been in control for ten months, says that the future of Yahoo will be providing personalized user experiences both on mobile and desktop, merging advertising and experience, group communication and collaboration. Yahoo currently has 200 million monthly active mobile users, and the tech giant’s app portfolio has between 60 and 75 mobile apps.